The state government is to announce the new RR rates on April 1 for residential, commercial and industrial properties. Every year, the new rates are implemented from January 1, but this time builders had urged the government to postpone it as the real estate market was stagnant. Property market sources said they expected the rates to go up by at least 10%, although in some areas there may be no rise.

Experts said the market in Nariman Point is grossly distorted and has hit outright sale of office premises. "People prefer to lease out properties," a landlord said. Today's RR rate for Nariman Point is over Rs 48,000 per sq ft when the market rate for office premises is in the range of Rs 26,000 to Rs 32,000 per sq ft.

Observers said the "illogical" pricing had badly affected the office transactions market and spelt trouble for buyers and sellers as they could be accused of undervaluing property.

Many companies have moved to BKC, which has emerged as the premier central business district. Nariman Point building occupants said the rates were impractical and any further RR rise would kill the market there. "No sale transaction will take place," one of them said.

Currently, the Goods and Services Tax (GST) is levied at 12 per cent on payments made for under-construction property or ready-to-move-in flats where completion certificate has not been issued at the time of sale.